Commentary: Mortgage investors have completely shrugged off this morning's reported 11.1% jump in March New Home Sales as they remain focused on Wednesday's first-ever press conference by the Chairman of the Federal Open Market Committee immediately following a closed-door monetary policy strategy session. This meeting and Mr. Bernanke's post-meeting comments will be particularly important to all credit market participants because it will be the last gathering of the nation's central bankers scheduled before the Fed wraps up its "QE2" fiscal stimulus program currently targeted for the end of June.
The story here is pretty straight forward.
Traders are also particularly interested to hear what the Fed Chairman has to say, if anything, about the likely pace of economic growth should Congress successfully make meaningful cuts to federal spending programs. If Fed Chairman Bernanke convinces market participants that the Fed is prepared to use all means at its disposal to hold benchmark short-term interest rates near historical lows to in an effort to support sagging economic growth - the stage will be set for an extended period (multi-weeks) of steady to perhaps fractionally lower mortgage interest rates.
On the other hand, the current market calm could be upset if Mr. Bernanke says anything that might indicate the Fed's current plans to complete its $600 billion bond-buying program (otherwise known as "QE2") -- and/or to leave benchmark short-term rates unchanged for an "extended period of time" -- will need to be modified in response to recent signs of improving economic performance.
It is a close call and interpretation will trump substance with respect to Mr. Bernanke's comments. Don't get complacent - pay attention and be ready to pull the "lock-in" trigger if the price objectives outlined in the strategy sections above are penetrated to downside.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
